Calculate the value of a short call if the strike price is $10.00, the premium is $1.50 and the spot price is $8.00.
Question
Calculate the value of a short call if the strike price is 1.50 and the spot price is $8.00.
Solution
To calculate the value of a short call option, you need to consider the strike price, the premium, and the spot price.
Step 1: Compare the strike price and the spot price. If the spot price is higher than the strike price, the option will be exercised. In this case, the spot price (10.00), so the option will not be exercised.
Step 2: If the option is not exercised, the value of the short call is equal to the premium received when the option was sold. In this case, the premium is $1.50.
Therefore, the value of the short call is $1.50.
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